Update: Upcoming Outsourcing Issues. December 9, 2013


1) National: As state legislatures prepare to reconvene in the New Year, In the Public Interest has published a comprehensive report on the failures of outsourcing public services to for-profit corporations. Out of Control highlights the failed experiences of cities and states across the country that recently experimented with outsourcing in a variety of sectors. It details failures in transparency, accountability, shared prosperity and competition, and makes recommendations of responsible contracting policies.Salon reports that “a package of privatization safeguards is expected to be introduced in nearly half the nation’s state legislatures in the next session.”


2) National: A national day of action on education, sponsored by the American Federation of Teachers and National Education Association, will take place today. “Protests have been building this year in different parts of the country against the education reform movement that is dominated by the use of standardized test scores as the chief ‘accountability’ metric and school ‘choice’ that has led to the growing privatization of public schools.”


3) National: New GAO report finds that “opportunities exist to enhance the transparency of annual budget justifications” at the Federal Bureau of Prisons. “Providing this information to Congress could help clarify what BOP proposes to spend on specific categories and subcategories reflected in its budget justification.” Finds that “private prison contracts made up over 60 percent of funding for the Contract Confinement PPA element.”


4) National: Standard & Poor’s, the rating agency, has requested comments on new guidelines for credit ratings it is preparing for project finance. The request includes a useful glossary of “public private partnership”-related jargon. Written comments are due February 7, 2014.


5) National/International: Macquarie’s dominance of the road privatization industrymay be threatened by Brookfield Asset Management and Global Infrastructure Partners (GIP). [Sub required]


6) National: New book reports that “students attending traditional, district-run public schools outperform their peers in charter schools and private schools.” Christopher A. Lubienski and Sarah Theule Lubienski, The Public School Advantage: Why Public Schools Outperform Private Schools. “Using sophisticated analytical tools with names that only a statistician could love—hierarchical linear modeling, multivariate regression—the authors conclude that the private-school effect is a myth.”


7) National: Department of Transportation looks to hire a director of the Office of Infrastructure Finance and Innovation. Among other duties, “the director will guide the $6.7 billion Transportation Infrastructure and Finance Innovation Act (TIFIA) Program and the $2.1 billion Private Activity Bond (PAB) Program.” Applications are due January 6. [Announcement]


8) National: Juan Santamaria Cases, who heads ACS’ “public private partnerships” unit in the U.S., is leaving the post on January 1 to become head of ACS’ global concessions arm, Iridium. His replacement hasn’t been named yet. [Public Works Financing, November 2013; sub required]


9) National: Former Transurban executive Michael Kulper, who specialized in toll road concessions, moves to IFM Investors. Transurban recently closed its New York office.


10) California: A three year comparative study of traditional design-build vs. “public private partnership” models commissioned by the San Francisco County Transportation Authority has begun. The study will look at the two segments of the Presidio Parkway project, the first of which was commissioned as a DB project and the second segment as a DBFOM/P3 project. Profs. Keith Molenaar of the University of Colorado and Qingbin Cui of the University of Maryland will oversee the study. [Public Works Financing, November 2013; sub required]


11) Colorado: Argosy University, a private for-profit college, is fined $3.3 million by the state for engaging in deceptive marketing practices. “Our investigation revealed a pattern of Argosy recklessly launching doctoral degree programs without substantiating or supporting that they led to the advertised outcomes,” Deputy Attorney General Jan Zavislan said in a statement.


12) Florida: Highlands County is to study the possible privatization of its EMS service. “There is no word on when the commission might hear presentations from the private vendors. In the meantime, commissioners will look at the costs associated with constructing a couple of new EMS buildings.”


13) Georgia: Paulding County airport officials, who privatized the county’s airport by stealth, acknowledge “procedural missteps in issuing bonds for a taxiway expansion that could help attract commercial airline flights.” Opponents of the deal “want to block the taxiway bond issue, which their attorney argued is unconstitutional. Charles McKnight, who represents residents Susan Wilkins and Anthony Avery, raised concerns about secrecy, use of county funds to back the airport bonds and the airport’s deal with a private firm that will benefit from the project.” McKnight says “there’s been overarching intent by the airport authority to keep the taxpayers in the dark,” and “also pointed to a violation of the state Open Meetings Act from a session at which the airport authority voted on the bonds. Meeting minutes did not state the reason for going into a closed executive session.” Nevertheless, a judge lets the bond sale go ahead. Meanwhile, the CEO of Delta Airlines has become embroiled in controversy for opposing the deal.


14) Indiana: A decisive vote is scheduled for this Thursday on the controversial est.$1.3 billion Illiana Expressway project. The full board of the Northwestern Indiana Regional Planning Commission—53 local government officials—will meet to decide if the project should be included in the 2040 Comprehensive Regional Plan. Public comment will not be allowed until the meeting’s end. Lawmaker questions road traffic and other estimates for the project.


15) Kansas: A veteran writes in to denounce the privatization of health services such as KanCare. “Medicaid patients that were on 24/7 care now find they receive only 40 hours a week under KanCare. Many patients find KanCare and companies of this type offer reduced pay. The result is fewer, less capable workers. (…) I am a disabled Korean combat veteran and I get my medical support and needs from the VA. I have been pleased with this service, but believe privatization of these services will reduce the care that my comrades and I now receive. The push to privatize government services will continue because our politicians are indebted to their rich backers.”


16) Louisiana: Legislative Fiscal Office warns that the state is short of funds to pay for the private operation of its hospitals. “Shawn Hotstream, who wrote the report for the Fiscal Office, said the projection is based on ‘the hardest numbers we can get right now,’ which are cost report worksheets.”


17) Michigan: After a nine day trial, a federal court rules that Detroit is eligible for Chapter 9 bankruptcy, opening the door for widespread privatization of public services and infrastructure. AFSCME appeals. The court urges that a “consensual plan” be developed, and says “this eligibility determination is merely a preliminary matter in this bankruptcy case” (p. 143). Emergency Manager Kevyn Orr will submit a detailed plan for implementing the bankruptcy law by early January. A Detroit Water and Sewerage Department employee says “they’re trying to privatize us and fire 80 percent of us. Philadelphia privatized their water department and their bills are now very high. They’re going to raise your rates if they get ahold of this place. The union was ready to give more than $100 million in concessions, but they wouldn’t accept it, Governor Snyder said no.” A. Paul Schaap, a millionaire businessman, has offered $5 million to privatize the Detroit Institute of Arts to a private nonprofit entity. A process for privatizing the city’s trash collection to Rizzo Environmental Services and Advanced Disposal, Inc. is being finalized. [Court documents]


18) Michigan: Genesee County commissioners deadlock 4-4 on a plan to outsource management of its animal control center. “The request doesn’t specify whether the contractor should or should not offer to provide the four road officers who make up the bulk of the department, and an official with the American Federation of State, County and Municipal Employees criticized the idea in advance of the vote.”


19) Missouri: Kansas City Federation of Teachers and School-Related Personnel(Local 691), parents and community members will take part today “in Christmas carol parodies demanding end to efforts to privatize the Kansas City Public Schools.” [AP Missouri Daybook, December 8, 2013]


20) New Jersey: Warren County residents urge Warren Haven Advisory Committeenot to privatize the county’s nursing home. The advisory board “hopes to” have its report to freeholders ready this month. “The freeholders will eventually make the report public.”


21) New York: State Department of Health approves of moves to privatize Massena Memorial Hospital, according to the hospital’s CEO. “Hospital officials agreed in July to hire the law firm of Hancock Estabrook LLP, Syracuse, at a cost not to exceed $100,000 for the study. Board members retained the firm in August to explore transitioning to a private, nonprofit facility. (…) Following Town Council approval, the hospital could start filing the paperwork such as a certificate of need to begin the conversion process. The third phase is to acquire tax-exempt status from the Internal Revenue Service. More recently, board members agreed to enter a contract with Freed Maxick Healthcare, financial analysis consultants, at a cost of up to $32,000 to do a financial study for the hospital.”


22) Ohio/National: Wright-Patterson Air Force Base is to privatize more utility operations, in addition to outsourcing management of its two water plants. “What the Department of Defense has decided to do is privatize all of our utilities so water is just one of them.”


23) Pennsylvania: Anthony M. Helfer, president of United Food and Commercial Workers Local 23 in Canonsburg, writes in to criticize the Pittsburgh Tribune’s “best efforts to distort reality” on liquor privatization. He says “it’s time for the Trib to end the crusade against the Pennsylvania Liquor Control Board—a valuable public asset that last year created more than $600 million to benefit all Pennsylvanians.”


24) Pennsylvania: “Kids for Cash,” a new film examining the scandal of a Pennsylvania judge’s imprisonment of children in return for kickbacks from a private company, is described as “deeply shocking and continually surprising.” Variety notes that “dismayingly, it is only when [former judge] Ciavarella’s punitive sentencing is linked to kickbacks that the community turns against him; his manifest cruelty is apparently acceptable practice when it’s merely part of ‘The War on Kids,’ to cite Cevin Soling’s 2009 documentary about zero tolerance.”


25) Pennsylvania: Plans to privatize Butler County’s Sunnyview nursing home spark outrage. A Request for Proposals has already been issued. The sale is expected to be completed in about five months. Submitted bids will be opened on December 18.


26) Tennessee: A plan to give Memphis sanitation workers a supplementary retirement benefit to top up their social security benefits passes the city council, but no funding plan is approved. “The discussion about retirement pay for the workers grew out of talks between the city and the workers’ union, AFSCME Local 1733, about bringing more efficiencies to the sanitation division to reduce costs and tamp down a push by some council members to privatize garbage collection. Some members of the current council have vowed privatization won’t happen under their watch.”


27) Utah: Cottonwood Heights, a suburb of Salt Lake City, regrets outsourcing its snow removal services. “Hundreds of residents, meanwhile, told city officials their streets had not been touched by a snow plow for 24 hours after the snow started falling.” Two government agencies had to step in to rescue the contractor and residents.


28) Virginia: Terry McAuliffe, the new Democratic governor of Virginia, may block the Route 460 “public private partnership” toll road between Petersburg and Suffolk unless federal permits are secured. The est. $1.8 billion project has been widely criticized as a bad deal that “represents a remarkable disregard for the notion of being good, responsible stewards of taxpayer dollars. And it’s indicative of a mindset in which fantasy has obscured logic.”


29) Virginia: Managed lanes “public private partnership” for I-66 attracts 19 responses. A request for proposals is expected to be released in early 2014. Abertis, Bechtel, Cintra, Fluor, Transurban and Macquarie Group have expressed interest. The project may cost $2 billion, and include bus rapid transit. [Sub required]


30) International: Eastern Europe may be a target for more “public private partnerships“ in infrastructure.  “On paper at least, Central and Eastern European states seemingly tick a number of boxes: they’re growing faster than the rest of Europe, yet present more robust institutional structures than many other developing economies; they remain in crucial need of more and better infrastructure, yet lack the resources and skills necessary to build it.” [Sub required]


31) Think Tanks: The pro-privatization Reason Foundation’s Robert W. Poole takes aim at critics of “public private partnerships” in his regular column in Public Works Financing [Public Works Financing, November 2013; sub required]. Poole is especially pained that mainstream publications such as Governing magazine, the New York State comptroller, and the California Legislative Analyst’s Office are challenging the biased and superficial pro-P3 boosterism of the privatization industry and its think tanks. Poole, Reason’s co-founder and currently its Searle Freedom Trust Transportation Fellow, has plugged road privatization companies: In the March 2012 issue of Reasonmagazine, he promoted Transurban, Fluor, Cintra and Zachry in an article defending road privatization companies from the charge that they are foreign-based. All four have been Reason funders. In 1999, Poole received the Roe Award, along with Grover Norquist, from the Koch-funded State Policy Network, on whose board of directors he once sat. David H. Koch is on the board of trustees of Reason.


32) Revolving Door News: Jamey Tesler, who has been general counsel for Massachusetts Treasurer Steven Grossman, heads to the law firm Greenberg Traurig. “Previously, Tesler served in multiple high-ranking roles in the Massachusetts Department of Transportation, and was its top adviser to the department during enactment of the state’s 2009 transportation overhaul law, which consolidated five transportation agencies.” Tesler will now work in Greenberg Traurig’s “litigation, government law and policy, public finance, and transportation practices. (…) He will also work on public private partnership initiatives and other transportation financing matters.” [Sub required]



Legislative Issues:


1) National: Public Works Financing compares two national infrastructure bank bills,one being promoted by Senator Mark Warner (D-VA) and the other by Rep. John Delaney (D-MD). Regarding “public private partnerships,” PWF says that the Warner bill is “focused on P3s,” while the Delaney bill requires that “at least 25% of projects must be P3s.” [Public Works Financing, November 2013; sub required]  Govtrack.us gives the Warner bill a 17% chance of getting past committee and a 4% chance of being enacted; and the Delaney bill a 12% chance of getting past committee and a 3% chance of being enacted.

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